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BENGALURU: Akey state utility has reversed its stand and will buy solar power from a large project, although at a lower rate than initially proposed, giving a boost to the renewable energy sector, which was being derailed by monopolistic distribution companies arm-twisting developers to lower tariffs.

Andhra Pradesh has agreed to buy electricity from Kadapa Solar Park, where a subsidiary of France’s Engie won a 250 MW solar auction held by NTPC seven months ago without any buyer for the output. “We’ve reached an agreement with NTPC to buy power from its proposed 250 MW plant at Kadapa provided it is bundled with 125 MW capacity of thermal power so that the tariff is lower than the Rs 3.15 per unit NTPC had initially proposed,” said Ajay Jain, principal secretary for energy in Andhra Pradesh.

He did not disclose the revised tariff. Neither NTPC nor Engie were willing to comment on the latest development. Plunging prices of renewable energy had led distribution companies in states including Andhra Pradesh, Uttar Pradesh, Jharkhand and Tamil Nadu to look for ways to pay the most recent record-low tariff to plants that were built when costs were much higher.

SolaireDirect, the subsidiary of Engie, won the auction in April with a bid of Rs 3.15 per unit, which was a record low at the time. NTPC expected discoms of Andhra Pradesh, the state in which the auction had been held, to buy the power as a matter of course.

However, the tariff fell to Rs 2.63 and thereafter to Rs 2.44 per unit in auctions at Rajasthan’s Bhadla Solar Park conducted by the Solar Corporation of India in the following month. The development spurred Andhra Pradesh to reject the Kadapa power at the offered price. The New & Renewable Energy Development Corporation of Andhra Pradesh agreed in July to waive transmission charges from Kadapa if NTPC found a buyer.

In the four months since then, NTPC was unable to rope in a buyer even after holding discussions with various states. After several rounds of discussions between NTPC, Engie and officials of Andhra’s renewable energy agency, a compromise was reached.

A factor that may have changed Andhra Pradesh’s mind was that global solar module prices, which had been in free fall for some months, had started inching up, an official revealed. Solar prices at forthcoming auctions are unlikely to fall further.

Engie has yet to receive a letter from NTPC confirming allotment of the project. Usually, power purchase agreements with auction winners are signed within two months of the auction. In this case, the PPA with Engie has yet to be signed and now with the matter resolved, an agreement is expected in the coming week.

Engie has about 360 MW of commissioned solar projects in India and 100 MW under construction.

Uttar Pradesh and Jharkhand have sought to renegotiate solar PPAs, while Tamil Nadu cancelled an auction held in January after getting lower prices at a sale conducted in July.